Michael Burrage: Why study the predictions when one can read the record? The Single Market doesn’t drive trade growth.

The dire forecasts of Britain’s economic oblivion post-Brexit have been coming thick and fast as June 23 approaches. The campaign to keep Britain in the EU hinges on these predictions, which have been dutifully supplied not only the Treasury but by an array of world bodies such as the IMF, the OECD and the WTO. Such a constellation of opinion has naturally led the Remain campaign to advance the claim that the vast majority of economic experts think Britain will be worse off outside the EU. The less than subtle undertone is: how could the average Brexiteer be so stupid as to think they know better?

It is an argument which will take in a lot of people and generate a lot of headlines, as we have seen. But where is the evidence underpinning the claims of the IMF, the OECD or the WTO? Their databases say precisely nothing about post-Brexit Britain. But they do provide a detailed breakdown of how trade has progressed over the course of the Single Market – and even further back than that. These are a much more reliable guide than the modelling of future decades.

Databases do not need to be courteous to leaders of governments, are unmoved by the received wisdom of the moment, and do not require assumptions to replace unknowns. They also allow us to see how accurate past predictions have been. Best of all, they are open for everyone to consult. Unfortunately for the Remain campaign, however, they do not provide the answers they want.

To take one example, a few weeks ago the IMF Direction of Trade Statistics database was updated to include figures from 2015. These show that the real growth of UK exports of goods to other EU nations over the course of the Single Market has been pitiful, the average for these years being just 0.98 per cent – whereas that of the Australia, Canada the United States and Japan, trading under WTO rules – which according to George Osborne is the worst possible possible post-Brexit option for the UK – grew at 1.16 per cent.

If the comparison is extended back to include the Common Market years, which were much better for UK exports, and measure from 1973-2015, these countries record growth of 3.80 per cent and the UK still lags with 2.53 per cent.
There are 40 countries trading with the EU under WTO rules, the value of whose exports to the EU exceeded $1 billion in 2015. 36 of them have a higher rate of export growth over these years than the UK. If 36 non-members trading under the worst possible option over the past 23 years have little difficulty increasing their exports to the EU, why should the UK worry about doing so? It can hardly do much worse than it has been doing for the past 23 years.

There may well be an informed and persuasive answer to this question, but the reason why the predictions of Christine Lagarde, Angel Gurria and others are less than persuasive is that they do not even see the problem or address the question. And David Cameron has of course, avoided it over many years. If it was important to remain in the Single Market and help to make rules, why is it that, having done this for 43 years, UK exports to the EU have grown more slowly than those who haven’t?

The OECD database shows that exactly the same is true of services. The services exports of 16 non-member countries to the EU, who have not therefore helped to make any of its rules, have grown faster than those of the UK over the years 2004-2012. If helping to make the rules is so important, how did this happen?

The WTO database allows one to check on the EU’s feted ability to strike trade agreements with economies around the world. The WTO’s Regional Trade Agreement Information System (RTAIS) shows that the European Commission has concluded agreements with a multitude of small countries (55, excluding the EFTA countries) which in 2014 accounted for just six per cent of total UK goods exports. Coverage of UK services exports is still smaller, since only a minority of agreements refer to services. After 40 years of negotiation, these cover only 1.85 per cent of UK services exports. The RTAIS also shows that many small countries – such as Chile, Korea, Singapore and Switzerland – have done far better in negotiating agreements, and comparisons of post-agreement growth rates suggest that they have been more effective than EU agreements in boosting trade.

Why do the Prime Minister and the Chancellor never point to this abundance of data? Why do they never draw attention to the record – that which we know for certain – but insist on using forecasts about future events which are utterly unknowable? Why do they prefer to be guided by Lagarde’s “hunch” that Brexit will hurt growth, rather than the very good detailed data that her organisation produces?

The use of expert opinion to shore up support for the EU is part of an attempt to prevent ordinary voters weighing the evidence for themselves. The average voter is not equipped to contest economic forecasts. But they are in a position to judge the empirical evidence of what has gone before – and that demonstrates beyond any doubt that the Single Market has never been the engine of trade growth that its cheerleaders claim.